GENDER PAY GAP

What is a gender pay gap? 

A gender pay gap is defined as “the difference between women’s and men’s average weekly full-time equivalent earnings, expressed as a percentage of men’s earnings [1].” 

The Australian Bureau of Statistics has calculated that, on average, women working full-time earn $239.80 less per week compared to men, a difference of 15.3% [1]. More specific wage gaps have been calculated, including a difference of 14.1% for Australian Stock Exchange executives [2] and a larger gap of 17.7% for workers at non-public organisations [1].   

Importantly, the gender pay gap does not directly compare like roles. The definition is broadly inclusive of the many complex causes that contribute to differences in women and men’s wages. 

What causes the gender pay gap? 

The gender pay gap is a complicated phenomenon. Research has indicated a number of major contributors, including the industries that women and men tend to occupy, the impact of career interruptions, differences in negotiation tactics and outcomes, and opportunities for leadership.  

Industry

The gender pay gap varies significantly across industries [3], from 26.1% in financial and insurance services industry to 6.8% in the public administration and safety industry.

Research has shown that occupations that are female-dominated are less valued than male-dominated ones, so individuals (i.e. women) in these occupations are paid less [4].

Worse, when women begin to flood into specific industries, occupations within that industry become devalued and pay subsequently decreases [5]. However, even within industries and occupations, we still see a pay gap between men and women [2].

Industry

Negotiations

Women have a tendency to avoid negotiations about their conditions and salary. This is partly due to fears of the backlash [6] and partly because women’s professional networks provide poorer information about salaries [7].

As a result, women tend to ask for less and accept the first offer, and negotiators respond accordingly [6]. These differences contribute to women’s lower average salary. However, recent evidence is more promising.

Younger women are more likely to negotiate compared to their older counterparts and are equally as likely as young men to negotiate [8]. Further, the outcomes of their negotiations are on par with men’s. Although these results suggest a promising improvement in workplace culture, it is too early to say whether this change is permanent.  See our sections on Creating a Negatiation Culture and Negotiating a Deal.

Negotiations

Career Interruptions

Numerous studies have shown that career gaps have a detrimental effect on career progression.

This is especially so for those angling for management or leadership roles [9]. For managers, career gaps result in reduced income that persist up to 25 years post-interruption [10].

Despite changes to gender norms, women are still much more likely than men to take time off work to accommodate family demands [11]. As a result, women may earn less in leadership roles compared to their male counterparts.

See our sections on Managing Home-Work Challenges and Family-Friendly Policies.

Career Interruptions

Networks and Leadership

Networks of professional contacts are vital for hearing about career advancement opportunities, salary expectations and more [12].

Workers tend to form networks with similar individuals, so networks are often gender segregated [13]. Since women are less likely than men to hold senior, powerful positions, women’s networks tend to prove less useful for career advancement [14].

However, pay gaps in Australia persist in senior levels even when taking into account confounding factors such as the executive position of women compared to men [2]!  

See our section on Building Networks.

Networks and Leadership

Why is the gender pay gap detrimental?     

 

Fundamentally, the gender pay gap is an issue of fairness and equity. A society in which half the population earns considerably less due to their gender is not one where people are treated equally. However, there are also individual, organizational, and social reasons to close the gap.  

Importance for women 

The gender pay gap leads to financial disparity between women and men. This is especially the case for retirement savings; women retire with approximately half the superannuation balance of men [15]. This disparity leads to women being vulnerable to financial distress in retirement and in the event of divorce. This has contributed to women over 55 years being the fastest growing group of people experiencing homelessness [16]. Additionally, gender pay gaps lead to women experiencing lower career satisfaction compared to men [17].  

Importance for organisations 

Women who are not satisfied with their work or careers are more likely to leave their current role [18]. Turnover is costly for organizations; knowledge is lost when employees walk out the door. Finding a suitable replacement and training them takes both time and resources. 

Importance for society 

The Australian government provides support for individuals in distress. If women’s retirement savings are considerably lower than men’s, governments are more likely to be called upon to financially support these women. The burden of homelessness in older women is also an additional strain for social services. Additionally, statistical modelling has shown that eliminating Australia’s gender pay gap could be worth $93 billion dollars – or 8.5% of Australia’s GDP [19].  

Strategies for organisations to address the gender pay gap  

Many promising solutions have been proposed for organizations to tackle the wage gap. The Workplace Gender Equality Agency is a great starting point for seeking resources.  

Conduct a pay gap analysis to identify the causes.  

Before an issue can be addressed, it needs to be understood. The Workplace Gender Equality Agency provides a toolkit that organisations can use to conduct an analysis of where pay gaps exist and the underlying causes of this gap [20]. If and when a gap is found, the toolkit provides a guide for taking action to address the gap [21]. 

Stop talking about merit!  

What comes to mind when you think of a manager? It’s likely that you’re thinking about the “ideal worker”: someone who works full-time, has had an uninterrupted career, and is focused on the organisation [22]. This is often the form of merit against which candidates for a managerial role are assessed. As long as we keep using this version of merit – and believing this form of merit leads to a fair process – the gender pay gap will persist [23]. 

Be a leader 

 

Yes, you! Why not consider becoming a Pay Equity Ambassador (PEA) to promote this worthy cause? Both men and women are encouraged to take part; in fact, there are more male pay equity ambassadors than female ambassadors!  

PEAs help to highlight support pay equity as an issue that is important to individuals, organisations and society as a whole. But they are also part of the solution by helping to communicate ways that individuals and organisations can identify and address any pay inequity. For further information (and do let us know if you take up the challenge!) click here.  

Further resources 

 

The Workplace Gender Equality Agency has many excellent resources on the gender pay gap: 

  • Click here for information about the gender pay gap, such as the effect of industry, age, and management level.  

  • Click here for links to guides and ways to address a gender pay gap  

 

KPMG have contributed a comprehensive report on the gender pay gap in Australia: 

  • Click here for the KPMG report “She’s price(d)less: The economics of the gender pay gap.  

Suggested videos 

Gender Equality - Organisations
Ted Talk - Close the Gender Pay Gap
 
  1. Workplace Gender Equality Agency. (2018a). Australia’s gender pay gap statistics February 2018. Retrieved from https://wgea.gov.au/sites/default/files/gender-pay-gap-statistics.pdf 

  2. Yanadori, Y., Gould, J. A., & Kulik, C. T. (2016). A fair go? The gender pay gap among corporate executives in Australian firms. The International Journal of Human Resource Management, (January), 1–25.  

  3. Workplace Gender Equality Agency. (2018a). Australia’s gender pay gap statistics February 2019. Retrieved from https://www.wgea.gov.au/data/fact-sheets/australias-gender-pay-gap-statistics 

  4. Blau, F. D., & Kahn, L. M. (2007). The gender pay gap: Have women gone as far as they can?. Academy of Management Perspectives, 21(1), 7-23. 

  5. Mandel, H. (2013). Up the down staircase: Women's upward mobility and the wage penalty for occupational feminization, 1970-2007. Social Forces, 91(4), 1183-1207. 

  6. Kulik, C. T., & Olekalns, M. (2012). Negotiating the gender divide: Lessons from the negotiation and organizational behavior literatures. Journal of Management, 38, 1387–1415. 

  7. Ely, R., Ibarra, H., & Kolb, D. M. (2011). Taking gender into account: Theory and design for women’s leadership development programs. The Academy of Management Learning and Education, 10, 474–493.  

  8. Artz, B., Goodall, A., & Oswald, A. J. (2018). Research: women as for raises as often as men, but are less likely to get them. Retrieved from https://www.washingtonpost.com/graphics/2017/business/women-pay-gap/?noredirect=on&utm_term=.52934405d62f.  

  9. Schneer, J., & Reitman, F. (2006). Time out of work: Career costs for men and women US managers. Equal Opportunities International, 25(4), 285-298. 

  10. Reitman, F., & Schneer, J. A. (2005). The long-term negative impacts of managerial career interruptions: A longitudinal study of men and women MBAs. Group & Organization Management, 30(3), 243-262. 

  11. Kirchmeyer, C. (2002). Gender differences in managerial careers: Yesterday, today, and tomorrow. Journal of Business Ethics, 37(1), 5-24. 

  12. Dreher, G. F., & Cox, T. H. (2000). Labor market mobility and cash compensation: The moderating effects of race and gender. Academy of Management Journal, 43, 890– 901.  

  13. McPherson, J., & Smith-Lovin, L. (1987). Homophily in voluntary organizations: Status distance and the composition of face-to-face groups. American Sociological Review, 52, 370–379.  

  14. Ibarra, H. (1992). Homophily and differential returns: Sex differences in network structure and access in an advertising firm. Administrative Science Quarterly, 37, 422–447.  

  15. Australian Human Rights Commission. (2018). Face the facts: Gender equality 2018. Retrieved from https://www.humanrights.gov.au/education/face-facts/face-facts-gender-equality-2018 

  16. Loane, S. (2017, 4 Sep). Equal pay day: The pay gap causes gender inequality in retirement too. Sydney Morning Herald. Retrieved from https://www.smh.com.au/money/super-and-retirement/equal-pay-day-the-pay-gap-causes-gender-inequality-in-retirement-too-20170904-gya3f8.html. 

  17. Carter, N. M. & Silva, C. (2010). Pipeline’s broken promise. New York: Catalyst. http://www.catalyst.org/system/files/Pipeline%27s_Broken_Promise_Final_021710.pdf 

  18. Rudman, L. A. & Phelan, J. E. (2008). Backlash effects for disconfirming gender stereotypes in organizations. Research in Organizational Behavior, 28, 61-79. 

  19. Cassells, R., Vidyattama, Y., Riyana, M., &McNamara, J. (2009). The impact of a sustained gender wage gap on the Australian economy: Report to the Office for Women, Department of Families, Community Services, Housing and Indigenous Affairs. Canberra, ACT: National Centre for Social and Economic Modelling. Retrieved from https://melbourneinstitute.unimelb.edu.au/assets/documents/hilda-bibliography/conference-papers-lectures/2010/Cassells_etal_gender_wage_gap.pdf  

  20. Workplace Gender Equality Agency. (2018b). Analysing your pay data. Retrieved from https://www.wgea.gov.au/addressing-pay-equity/toolkits-conducting-pay-gap-analysis 

  21. Workplace Gender Equality Agency. (2018c). Guide to gender pay gap equity. https://www.wgea.gov.au/sites/default/files/guide-to-gender-pay-equity.pdf 

  22. Mainiero, L. A., & Sullivan, S. E. (2005). Kaleidoscope careers: An alternate explanation for the “opt-out “revolution. Academy of Management Perspectives, 19(1), 106-123. 

  23. Edwards, K. (2017, 4 Sep). The gender pay gap won’t budge as long as we keep talking about ‘merit’. Sydney Morning Herald. Retrieved from https://www.smh.com.au/lifestyle/life-and-relationships/the-gender-pay-gap-wont-budge-as-long-as-we-keep-talking-about-merit-20170903-gy9yyv.html